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The Details You Can Miss About Medicare

September 25, 2018
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Before you enroll, take note of what the insurance does not cover and the changes ahead.

Misconceptions about Medicare coverage abound. Our national health insurance program provides seniors with some great benefits. Even so, traditional Medicare does not pay for dental care, vision care, or any real degree of long-term care. How about medicines?

Original Medicare (Parts A & B) offers no prescription drug coverage. You may not currently take prescription medicines, but you may later, and can you imagine paying out of pocket for them? Since 2013, the prices of the 20 most-prescribed drugs for seniors have been reported to have risen an average of 12% annually.   

To address this issue, many seniors sign up for Part D (prescription drug) plans, which may reduce the co-pays for certain generic medicines down to $1 or $0. As private insurers provide Part D plans, the list of medicines each plan covers varies – so, carefully check the list, also called the formulary, before you enroll in one. Keep checking it, as insurers are permitted to change it from one year to the next.

You may want a Medigap policy, considering your Part B co-payments. If you stick with original Medicare, you will routinely pay 20% of the cost of medical services and procedures covered by Part B. If you need a hip replacement or a triple bypass, you could face a five-figure co-pay. Medigap insurance (also called Medicare Supplement insurance) addresses this problem with supplemental Part B coverage. Premiums and services can vary greatly on these plans, which are sold by insurers.

If you want dental and vision coverage (and much more), you may want a Part C plan. Around a third of Medicare beneficiaries enroll in these plans, also called Medicare Advantage programs. The typical Part C plan includes all the coverage of Medicare Parts A, B, and D, plus the dental and vision insurance that original Medicare cannot provide. Medicare Advantage plans also limit beneficiary out-of-pocket costs for the services they cover.

Part C plans may soon offer even more benefits. They will be allowed to include services beyond normal medical insurance beginning in 2019. Starting in October, they can reveal what new perks, if any, they have chosen to offer. Some of the new benefits you might see: coverage for the cost of home health aides, adult day care, palliative care, the installation of grab bars and mobility ramps in the home, and trips to and from medical appointments. The list of potential benefits could expand further in 2020.

Few seniors who enroll in Part C plans switch out of them. If you enroll in one, you should realize that these plans are regional rather than national – so, if you move, you may have to find another Part C plan or return to traditional Medicare, with or without Medigap coverage.

The Medicare Advantage Disenrollment Period is disappearing. A recently passed federal law, the 21st Century Cures Act, does away with this annual January 1-February 14 window. Beginning in 2019, there will simply be an annual Medicare Advantage Open Enrollment Period from January 1-March 31. During these three months, Medicare recipients will have the chance to either switch Part C plans or disenroll from a Part C plan and go back to original Medicare.

Some Medicare Cost plans are being phased out. These plans, which offer some features of Medigap policies and some features of Medicare Advantage programs, are ending in certain counties within 15 states and in the District of Columbia. Enrollees are being left to search for new coverage.

If you are financially challenged, you may have options. State subsidies and Medicare savings programs are available to help households handle co-payments and deductibles under original Medicare. Some non-profit groups offer pharmaceutical assistance programs (PAPs) to help Medicare beneficiaries pay less for medicines.

At HFG Wealth Management, we embrace a method of financial planning known as Financial Life Planning™. We believe this is a financially effective and personally rewarding approach to creating a practical, lasting financial plan. As financial professionals using the life planning approach, our purpose is to assist individuals and families in creating a long-term vision that is consistent with their core values. At HFG we recognize that life events and life transitions can impact your financial responsibilities and your vision of the future. We are here to provide you with tips and strategies to get you started and help you reach your financial and life goals at every stage. For more information, please visit www.hfgwm.com or call 832.585.0110.

“The information contain herein is general in nature and may not be suitable for everyone. We encourage you to give us a call, to discuss your specific situation and to help determine the appropriate course of action.”

A Look at HSAs


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A Health Savings Account may provide you with remarkable tax advantages. 

Why do some households inquire about Health Savings Accounts? They have heard about what an HSA can potentially offer them: a pool of tax-exempt dollars for health care, a path to tax savings, even a possible source of retirement income after age 65. You may want to look at this option yourself.

About 26 million Americans now have an HSA. You must enroll in a high-deductible health plan (HDHP) to have one, a health insurance option that is not ideal for everybody. In 2018, this deductible must be $1,350 or higher for individuals or $2,650 or higher for a family. Typically, in exchange for accepting the high deductible, you may pay relatively low premiums for the coverage.

You fund an HSA with tax-free contributions. This year, an individual can direct as much as $3,450 into an HSA, while a family can contribute up to $6,900. (These contribution caps are $1,000 higher if you are 55 or older in 2018.) Some employers will even provide a matching contribution on your behalf.

An HSA can offer you three potential opportunities for tax savings. Your account contributions are tax free (that is, tax deductible), the earnings in your account grow tax free, and you can withdraw funds from your HSA, tax free, so long as they are used to pay for qualified health care expenses, such as deductibles, co-payments, and hospitalization costs. (HSA funds may not be used to pay health insurance premiums.)  

At age 65, you can even turn to your HSA for retirement income. Currently, federal tax law allows an HSA owner 65 or older to withdraw HSA funds for any purpose, tax free. Yes, any purpose. You can use the money to pad your retirement income; you can use it to pay Medicare premiums or long-term care insurance premiums. No Required Minimum Distributions (RMD’s) are ever required of HSA owners. (Prior to age 65, an HSA withdrawal not used for qualified medical expenses is assessed a 20% I.R.S. penalty.)

Why is an HSA less attractive for some people? Well, the first thing to mention is the related high-deductible health plan. When you enroll in one of these plans, you agree to pay all (or nearly all) of the cost of medicines, hospital stays, and doctor and dentist visits out of your pocket until that high insurance deductible is reached. The other hurdle is just saving the money. If you pay for your own health insurance, just meeting the monthly premiums can be a challenge, especially if your household contends with other significant financial pressures. There may not be enough money left over to fund an HSA. Also, if you are a senior (or a younger adult) with a chronic condition or illnesses, you may end up spending all of your annual HSA contribution and reducing your HSA balance to zero year after year. That works against one of the objectives of the HSA – the goal of accumulation, of growing a tax-advantaged health care fund over time.

At HFG Wealth Management, we embrace a method of financial planning known as Financial Life Planning™. We believe this is a financially effective and personally rewarding approach to creating a practical, lasting financial plan. As financial professionals using the life planning approach, our purpose is to assist individuals and families in creating a long-term vision that is consistent with their core values. At HFG we recognize that life events and life transitions can impact your financial responsibilities and your vision of the future. We are here to provide you with tips and strategies to get you started and help you reach your financial and life goals at every stage. For more information, please visit www.hfgwm.com or call 832.585.0110.

“The information contain herein is general in nature and may not be suitable for everyone. We encourage you to give us a call, to discuss your specific situation and to help determine the appropriate course of action.”

 

 

Financial Planning with Health Insurance in Mind

September 11, 2018
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How much might health care cost you someday?

 “Financially speaking, what would be the worst thing that could happen to you?” If you ask a hundred people in their forties that question, you may get a dozen different answers. Some may say “my business going under” or “losing my house.” Some might say “a divorce,” “a lawsuit,” or “being laid off.” But how many would say “a severe illness?”  A catastrophic illness seems like a remote possibility to many; distant, decades away. As a result, that possibility may be overlooked in our financial planning.

The healthiest of us may need to save the most for health care. This may seem paradoxical, but think about what many people in their eighties or nineties experience: years of declining health and mobility, and accompanying high health care expenses.

The more you earn, the more you may pay for essential health benefits. Take the case of Medicare premiums. Most Medicare beneficiaries who are single filers with modified adjusted gross incomes of $85,000 or less are paying monthly Part B premiums of $104.90-$121.80 this year. In contrast, single filers with MAGIs between $85,001-107,000 are paying Part B premiums of $170.50 a month. That premium jumps to $243.60 for a single filer with MAGI greater than $107,000, and extremely high-earning individuals pay more than that. Pre-retirees should be mindful of this, and the fact that Medicare does not pay for long term care or dental careYour income level may also affect how much you pay for health coverage before you retire.

So looking ahead, is a Health Savings Account a good idea? For the future, it may be. An HSA must be used in conjunction with high-deductible health plans, but even with that requirement, these accounts can give pre-retirees a nice, dedicated savings vehicle to plan for future health care expenses. An HSA may become an important part of a long-run financial strategy.

The annual contribution limit on an HSA is currently $3,350 for individuals, $6,750 for families. Contributions are 100% tax-deductible. (You can even make $1,000 catch-up contributions beginning in the year you turn 55, as long as you are not a Medicare recipient.) You can also optionally invest the money within the account. An HSA is tax-advantaged: assets get tax-free growth, and withdrawals are tax-free if you use the money to pay for qualified health expenses. An HSA can also have another nice feature: once you turn 65, you may use withdrawals from them for non-medical purposes, though such withdrawals will be taxable. If you enroll in Medicare, you can no longer contribute to an HSA – so it is vital to fund these accounts for some years before retiring.

It is only prudent to factor potential health care costs into your financial plan. Some healthy pre-retirees may assume that they will need only a five-figure rather than six-figure sum to address them. That assumption may be flawed and can be wise to consider all options into your final plan.

At HFG Wealth Management, we embrace a method of financial planning known as Financial Life Planning™. We believe this is a financially effective and personally rewarding approach to creating a practical, lasting financial plan. As financial professionals using the life planning approach, our purpose is to assist individuals and families in creating a long-term vision that is consistent with their core values. At HFG we recognize that life events and life transitions can impact your financial responsibilities and your vision of the future. We are here to provide you with tips and strategies to get you started and help you reach your financial and life goals at every stage. For more information, please visit www.hfgwm.com or call 832.585.0110.

“The information contain herein is general in nature and may not be suitable for everyone. We encourage you to give us a call, to discuss your specific situation and to help determine the appropriate course of action.”

 

The Medical Expense Deduction in 2018


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Tax reform has lowered the threshold.

 If you itemize, you should note the reduced medical deduction threshold for 2018. This year, you can deduct qualified medical expenses exceeding 7.5% of your adjusted gross income. Next year, the threshold for the medical expense deduction returns to 10% of AGI. (The Tax Cuts & Jobs Act of 2018 also allowed the 7.5% threshold to apply retroactively to the 2017 tax year.)

So, if you are considering surgery or dental work in the future that could mean sizable out-of-pocket expenses for you, it might be better from a tax standpoint to schedule these procedures for 2018 instead of 2019.

What kinds of unreimbursed expenses qualify for the deduction? The list is long. For a start, the Internal Revenue Service says these types of expenses may qualify as tax deductible: out-of-pocket fees to medical and dental professionals, psychiatrists and psychologists, and certain nontraditional medical practitioners; money spent to participate in a weight-loss program in response to a doctor-diagnosed condition or disease; payments for prescription drugs and insulin; payments for smoking cessation programs and prescription drugs to facilitate nicotine withdrawal; money spent on inpatient treatment or acupuncture at a rehab facility; and, money spent on inpatient hospital care or residential nursing home care. That last item deserves further explanation regarding nursing homes. If a taxpayer is in a nursing home first and foremost to receive medical care, the I.R.S. says that the cost of that care and any lodging and meal costs borne by the taxpayer are deductible. Should the taxpayer reside in a nursing home primarily for other reasons, the I.R.S. limits the deduction to the medical care provided.

Other potential medical expense deductions are worth noting. You can of course deduct payments made for health care aids such as wheelchairs, false teeth, service animals and guide dogs, hearing aids, contact lenses, and reading or prescription eyeglasses. In addition, you can usually deduct insurance premiums that you have paid for insurance policies covering medical care or long-term care (as opposed to premiums paid on these policies by your employer). Lastly, you can often deduct transportation costs you incur related to qualified medical expenses: bus, train, and plane fares; gasoline expenses; parking and toll fees.

What kinds of expenses do not qualify? The cost of basic toiletries and toothpaste cannot be deducted; the same goes for cosmetics. Expenses for cosmetic surgery are usually not deductible, and neither are expenses for wellness programs or vacations. Non-prescription, over-the-counter drugs or medicines are non-deductible. Nicotine patches and gum may not be deducted, unless they have been prescribed for you. Burial and funeral expenses are also ineligible for the medical expense deduction.

Talk to a tax professional about the possibilities here. You may find it advantageous to itemize in 2018 using Schedule A so that you can claim medical expense deductions and take advantage of what could be the last year for the 7.5% threshold. Or, you might find that taking the newly enlarged standard deduction makes more financial sense. If you think your household will have significant medical expenses this year, it might be wise to compare the options.

At HFG Wealth Management, we embrace a method of financial planning known as Financial Life Planning™. We believe this is a financially effective and personally rewarding approach to creating a practical, lasting financial plan. As financial professionals using the life planning approach, our purpose is to assist individuals and families in creating a long-term vision that is consistent with their core values. At HFG we recognize that life events and life transitions can impact your financial responsibilities and your vision of the future. We are here to provide you with tips and strategies to get you started and help you reach your financial and life goals at every stage. For more information, please visit www.hfgwm.com or call 832.585.0110.

“The information contain herein is general in nature and may not be suitable for everyone. We encourage you to give us a call, to discuss your specific situation and to help determine the appropriate course of action.”

 

How To Keep Healthcare Costs Under Control In Retirement


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If you’ve been covered by a generous employer group health plan, you may be in for a rude awakening when you retire. Here are some tricks for keeping health care costs under control after you retire. Although the government may subsidize some of your health care costs under the Medicare program, you will still be responsible for certain out-of-pocket costs. You will want to do everything in your power to prepare for these costs, as well as avoid unnecessary costs like late enrollment penalties, overpriced private plans, and superfluous trips to the doctor.

Did you know that there’s even a penalty for not enrolling in Medicare on time? That’s because the only way the system can work is if everyone — the sick and the healthy, the young and the old — participate in the program. If you fail to enroll in Medicare when you are supposed to, you will be charged a penalty equal to 10% of the Part B premium for every 12 months you delayed signing up for Medicare. The penalty is permanent and must be paid for the rest of your life. To avoid it, find out when you need to enroll in Medicare and be sure to sign up during your enrollment period. If you are retired and covered by a retiree plan, or if you are working and covered by a plan that covers fewer than 20 employees, you must enroll in Medicare Part B no later than the third month after your 65th birthday. If you (or your spouse) are still working and covered by a group plan that covers 20 or more employees, you must enroll in Medicare no later than the 7th month after your group coverage ends. Practically speaking, you’ll want to avoid gaps in coverage by enrolling in Medicare before your employer coverage ends. But to avoid penalties, make sure you sign up no later than the end of your enrollment period.

Medicare does not cover everything. In order to avoid coverage gaps for prescription drugs and the portion of medical services that Medicare doesn’t pay for, you will need to have private insurance. Whether you buy a comprehensive Medigap policy plus a standalone prescription drug plan, or enroll in a Medicare Advantage plan, you will need to shop carefully to get the best plan for your needs. Comparing monthly premiums is just a starting point. You will also need to pay attention to deductibles, copayments, and coinsurance amounts considering the specific drugs and types of services you need.

Of the factors underlying the meteoric rise in health care costs over the past two decades, the growing role of health insurance in our country has been held responsible in part because it tends to make consumers unaware of costs when they seek health care services. This is especially true for workers with comprehensive employer health insurance. Once you go onto Medicare you will need to be aware of health care costs. Otherwise you could be surprised by some rather large medical bills. Start by asking if your doctor accepts Medicare—some don’t. Ask if the doctor accepts assignment, which means you will be billed no more than the Medicare-approved amount, with you (or your Medigap insurer) being responsible only for the deductible and coinsurance amounts. Examine your insurer’s drug list and be aware of the copayments and coinsurance amounts for drugs you take. Do this annually, because drug plans change from year to year. Take into consideration all of your health care needs, including dental care and other services not covered by Medicare, and be aware of all of your out-of-pocket costs — preferably before they are incurred.

If your income is over $85,000 (if single) or $170,000 (if married), you will be charged an income-related monthly adjustment amount on top of your regular Part B and Part D premiums. These are cliff thresholds, which means if your income is just $1 over the amount, you will be charged the higher amount. There may not be anything you can do to avoid the IRMAA, but if you’re near one of the cliff thresholds, proper tax planning care save you a lot of money in additional premium expenses over the course of your retirement.

Although staying healthy won’t help you reduce your premium costs, it will certainly help you avoid copayments and coinsurance amounts. Certain conditions, if discovered early, can be treated quickly and easily and at a much lower cost than if hospitalization or expensive drugs are required. You should view staying healthy as a reward in and of itself, and also bear in mind that it will not necessarily save you money overall: The longer you live, the more you’ll pay in premiums. When designing a healthcare budget, it pays to account for the possibility of a very long life.

At HFG Wealth Management, we embrace a method of financial planning known as Financial Life Planning™. We believe this is a financially effective and personally rewarding approach to creating a practical, lasting financial plan. As financial professionals using the life planning approach, our purpose is to assist individuals and families in creating a long-term vision that is consistent with their core values. At HFG we recognize that life events and life transitions can impact your financial responsibilities and your vision of the future. We are here to provide you with tips and strategies to get you started and help you reach your financial and life goals at every stage. For more information, please visit www.hfgwm.com or call 832.585.0110.

“The information contain herein is general in nature and may not be suitable for everyone. We encourage you to give us a call, to discuss your specific situation and to help determine the appropriate course of action.”

 

 

What Determines Car Insurance Rates?

August 22, 2018
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Driver history is just one factor; there are many others.

 Your auto insurance payment is not just based on your driving history. Assorted variables come into play that have nothing to do with your accident record or your experience behind the wheel.

Where you live counts. If you reside in a congested big-city neighborhood with an unyielding traffic stream, that could push your premium higher. Certainly, the accident threat is greater there than in a rural area. In addition, high-density neighborhoods may see more vandalism, break-ins, and auto theft than lower-density communities – plus, more car insurance fraud schemes.

The vehicle you drive factors into the calculation. Yes, a luxury car will commonly cost more to insure than an economy car, but vehicle price is not the only factor. Certain makes and models are stolen more than others: the Honda Civic, the Nissan Altima, and the Toyota Camry are prime targets for auto thieves. If you drive a 4×4 SUV, the insurer may factor in some off-road use, even if you just want to drive it to work, the beach, and the mall. Engine horsepower could also affect your rates.

If you own a home, your auto insurance premium might be less than that of a renter. Renters are perceived to have more trouble with their household finances than homeowners. Whether this is true or not, the status of being a homeowner is a positive element in auto insurance rate calculation.

Are you married? That is a plus when it comes to auto insurance rates, because some insurers think married people lead less risky lives than single people. This belief was reinforced when the National Institutes of Health released a study that concluded that single people were twice as likely as married people to get into car accidents. Like it or not, this presumption affects rates.

If you are an older male, your rates might be the lowest. A Consumer Federation of America white paper looked at the rates set by some companies and found that older men (at least in ten cities) paid less than older women. On the other hand, younger men are thought to be the most reckless drivers (and drivers from that demographic are most often the drivers in fatal wrecks).

Bad credit can mean higher premiums. It can elevate premiums even more than an accident in some states. In three states, this does not apply: California, Hawaii, and Massachusetts. All three bar insurance carriers from hiking auto insurance rates due to personal credit histories.

Your job (and how you commute to work) may matter. If you drive a long way to and from work, that is a negative factor. If you commute during peak hours or between 12:00-2:00am, that can be another negative factor.

Insurers run these variables through their own refined algorithms. This is another reason car insurance rates vary so much from carrier to carrier. Compare and contrast and shop around, for one company may give more weight to some factors than others – and the savings found through thorough shopping could be significant.

At HFG Wealth Management, we embrace a method of financial planning known as Financial Life Planning™. We believe this is a financially effective and personally rewarding approach to creating a practical, lasting financial plan. As financial professionals using the life planning approach, our purpose is to assist individuals and families in creating a long-term vision that is consistent with their core values. At HFG we recognize that life events and life transitions can impact your financial responsibilities and your vision of the future. We are here to provide you with tips and strategies to get you started and help you reach your financial and life goals at every stage. For more information, please visit www.hfgwm.com or call 832.585.0110.

“The information contain herein is general in nature and may not be suitable for everyone. We encourage you to give us a call, to discuss your specific situation and to help determine the appropriate course of action.”

Travel Insurance – What You May Want To Know


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Soon you’ll be on your way, taking that trip you’ve looked forward to for ages, but suppose something happens. If you get sick, lose your suitcase, or have to cut your trip short, will any of your existing insurance policies cover your expenses or reimburse you for your losses? If not, you might want to purchase travel insurance – available from insurance companies, travel agents, tour operators and cruise lines.

If you can’t make it after all or have to cut it short — trip cancellation/interruption insurance
You’re ready to go, but the cruise line has gone under financially. Or perhaps you’ve arrived at your hotel only to be handed a telegram informing you that Uncle George is seriously ill and you must return home immediately. If your trip is canceled or cut short, will you be able to get any of your money back?

Trip cancellation/interruption insurance protects you if you must cancel your travel plans before you leave or cut your trip short due to an unforeseen event. Covered contingencies can include bad weather, the financial failure of a service provider such as a cruise line or a travel agency, your illness or that of a family member while on the trip, or an illness or death at home. But coverage varies widely from policy to policy, so check the exclusion section carefully. Your definition of an unforeseen event may differ from that of the insurance provider. For example, some companies don’t recognize a recurrence of your pre-existing medical condition as unforeseeable.

Under the policy, you’ll be reimbursed for your nonrefundable prepaid expenses, such as tour deposits, airline tickets  or hotel rooms. To determine what the insurance covers, you may need to check the terms of your travel agreements and find out what guarantees are offered by the carrier, travel agent, or tour operator. Cruise lines, for instance, may refund most of your money if you cancel several weeks before your scheduled departure, but they’ll give you less or none back if you cancel a few days before you’re supposed to leave. In that case, you’d get nothing back unless you purchased trip cancellation/interruption insurance.

Trip cancellation/interruption insurance is different from cancellation waivers offered by cruise lines and tour operators. These waivers are not insurance; they’re simply company guarantees that your money will be refunded under certain circumstances. They usually won’t cover your last-minute cancellation and they won’t protect you if the company goes out of business.

If that fever isn’t just excitement—short-term supplemental health insurance
Your individual or group health insurance policy typically covers you if you’re traveling within the United States. Still, it’s a good idea to check with your insurance provider before you travel so that you fully understand the coverage conditions. If you’re traveling overseas, beware–your health insurance policy may not cover you at all. Even if it does, it may not provide the same benefits overseas that it does in the United States. Check the limitations of your policy carefully, and call your insurer’s customer service department if you have questions. If your health insurance doesn’t provide you with adequate coverage while you’re traveling, consider purchasing a short-term supplemental health insurance policy from an insurance company, travel agent, tour operator, or cruise line. These policies often combine accident and/or sickness coverage with medical evacuation coverage, which pays all or part of the cost of getting you back to the United States if you’re traveling overseas (something most basic health insurance polices won’t cover). The terms of supplemental health policies vary widely, so before purchasing this insurance, ask to see a copy of the policy and get the answers to the following questions:

  • Does the plan pay the cost of medical care needed for sickness, accidents, or both?
  • What procedures must you follow to see a doctor or go to the hospital?
  • Will you have to get approval before you receive care?
  • Does the policy pay for care upfront, or will you have to pay and wait to be reimbursed?
  • What are the deductible, co-payments, and/or coinsurance costs?
  • What exclusions and restrictions apply?
  • What is the maximum amount of coverage under the policy?
  • Are translator services available?

If you lose your shirt—baggage insurance
Baggage insurance reimburses you if your personal belongings are lost, stolen, or damaged while you’re traveling. Before you purchase it, however, find out if you already have adequate protection. For instance, airlines may be liable for damage caused by their negligence, and they’re liable for lost or stolen baggage after check-in, up to their stated limit per passenger. Some credit card companies and travel agents also provide supplemental baggage insurance at no charge to you. Your homeowners or renters policy may protect your personal belongings against theft when you travel, as well.

Purchasing baggage insurance may be appropriate when you want 24-hour protection, not just protection after your bags are checked in with an airline. Baggage insurance may also offer higher liability limits than those offered by an airline. However, check the policy’s fine print. If you carry expensive items, you may not be fully reimbursed if they’re lost or stolen, and benefit limits may apply to certain items like electronics (e.g., laptop computers) or jewelry. You also may not be reimbursed for anything covered under another policy; if your bags are lost or damaged by an airline, you may need to seek reimbursement from the airline first.

If you lose more than that–accidental death and dismemberment insurance
Accidental death and dismemberment insurance (AD & D) is inexpensive coverage that compensates you if you lose a limb or an eye, or that compensates your beneficiary if you die in an accident. You can purchase this coverage as a separate policy, as a rider to an existing policy, or as part of a travel insurance policy. You may also receive this coverage as a “free” benefit when you purchase airline, train, or bus tickets using your credit card. AD & D policies usually cover, up to certain limits, medical expenses associated with an accident. Before you purchase this coverage, make sure you don’t have duplicate coverage elsewhere. You may already have AD & D coverage if you have adequate life insurance, or through a group insurance plan sponsored by your employer or credit card company.

At HFG Wealth Management, we embrace a method of financial planning known as Financial Life Planning™. We believe this is a financially effective and personally rewarding approach to creating a practical, lasting financial plan. As financial professionals using the life planning approach, our purpose is to assist individuals and families in creating a long-term vision that is consistent with their core values. At HFG we recognize that life events and life transitions can impact your financial responsibilities and your vision of the future. We are here to provide you with tips and strategies to get you started and help you reach your financial and life goals at every stage. For more information, please visit www.hfgwm.com or call 832.585.0110.

“The information contain herein is general in nature and may not be suitable for everyone. We encourage you to give us a call, to discuss your specific situation and to help determine the appropriate course of action.”

 

 9 Things You Need To Know About Life Insurance

August 15, 2018
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A quick look at the different types of policies.  

When it comes to life insurance, there are many choices. Whole life. Variable universal life. Term. What do these descriptions really mean? 

All life insurance policies have two things in common. They guarantee to pay a death benefit to a designated beneficiary after a policyholder dies (although, the guarantee may be waived if the death is a suicide occurring within two years of the policy purchase). All require recurring payments (premiums) to keep the policy in force. Beyond those basics, the differences begin.

Some life insurance coverage is permanent, some not. Permanent life insurance is designed to cover you for your entire life (not just a portion or “term” of it), and it can become an important element in your retirement planning. Whole life insurance is its most common form.

Whole life policies accumulate cash value. How does that happen? An insurer directs some of your premium payments into a reserve account and puts those dollars into investments (typically conservative ones). The return on the investments influences the growth of the cash value, which builds up according to a formula the insurer sets.  A whole life policy’s cash value grows with taxes deferred. After a while, you gain the ability to borrow against that cash value. You can even cancel the policy and receive a surrender value. Premiums on whole life policies, though, are usually higher than premiums on term life policies, and they may rise with time. Also, beneficiaries only receive a death benefit (not the policy’s cash value) when a whole life policyholder dies.    

Universal life insurance is whole life insurance with a key difference. Universal life policies also build cash value with taxes deferred, but there is the chance to eventually pay the monthly premiums out of the policy’s investment portion. Month by month, some of your premium on a universal life policy gets credited to the cash reserve of the policy. Sooner or later, you may elect to pay premiums out of the cash reserve – so, the policy essentially begins to “pay for itself.” If all goes well, a universal life policy may have a lower net cost than a whole life policy. If the investments chosen by the insurer severely underperform, that can mean a dilemma: the cash reserve of your policy may dwindle and be insufficient to keep paying the premiums. That could mean cancellation of the policy.     

What about variable life (and variable universal life) policies? Variable life policies are basically whole life or universal life policies with a riskier investment component. In VL and VUL policies, you may direct percentages of the cash reserve into investment sub-accounts managed by the insurer. Assets allocated to the sub-accounts may be put into equity investments of your choice as well as fixed-income investments. If you choose equity investments, you (and the insurer) assume greater risk in exchange for the possibility of greater reward. The performance of the subaccounts cannot be guaranteed. As an effect of this risk exposure, a VUL policy usually has a higher annual cost than a comparable UL policy.

The performance of the stock market may heavily affect the performance of the subaccounts and the policy premiums. A bull market may mean better growth for the policy’s cash value and lower premiums. A bear market may mean reduced cash value and higher monthly payments to keep the policy going. In the worst-case scenario, the cash value plummets, the insurer hikes the premiums in order to provide the guaranteed death benefit, the premiums become too expensive to pay, and the policy lapses.

Term life insurance is life insurance that you “rent” rather than own. It provides coverage for a set period (usually 10-30 years). Should you die within that period, your beneficiary will get a death benefit. Typically, the premium payments and death benefit on a term policy are fixed from the start, and the premiums are much lower than those of permanent life policies. When the term of coverage ends, you may be offered the option to renew the coverage for another term or to convert the policy to a form of permanent life insurance.

Term life is cheap, but the tradeoff comes when the term is up. Just as you cannot build up home equity by renting, you cannot build up cash value by “renting” life insurance. When the term of coverage is over, you usually walk away with nothing for the premiums you have paid.

Which coverage is right for you? Many factors may come into play when deciding which type of life insurance will suit your needs. The best thing to do is to speak with a professional who can help you examine these factors, so you can determine which type of coverage may be appropriate.

At HFG Wealth Management, we embrace a method of financial planning known as Financial Life Planning™. We believe this is a financially effective and personally rewarding approach to creating a practical, lasting financial plan. As financial professionals using the life planning approach, our purpose is to assist individuals and families in creating a long-term vision that is consistent with their core values. At HFG we recognize that life events and life transitions can impact your financial responsibilities and your vision of the future. We are here to provide you with tips and strategies to get you started and help you reach your financial and life goals at every stage. For more information, please visit www.hfgwm.com or call 832.585.0110.

The information contain herein is general in nature and may not be suitable for everyone. We encourage you to give us a call, to discuss your specific situation and to help determine the appropriate course of action.”

Watch for These Insurance Blind Spots


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There are some incidents that standard policies may not cover.  

No insurance policy will protect you from everything. Even the most comprehensive umbrella liability policy has shortcomings. A good auto, homeowner, or renter policy will insure you against what the carrier believes to be common threats. There are other risks, however, that you might need to address.

Earthquakes. A typical homeowner policy offers no earthquake protection, and that can present a serious coverage gap in certain states.

Floods. In some regions, houses may be more at risk for flood damage than their owners believe. Last year, tens of thousands of Southeast Texas homeowners discovered just how vulnerable they were in the wake of Hurricane Harvey – neighborhoods well inland were inundated. Just 12% of U.S. homeowners have flood insurance coverage, which the average homeowners policy does not provide.

Sewage backups. The main sewer system in your city is the city’s responsibility – but the pipes that reach from the main sewer system in the street onto your property are your responsibility. If something goes wrong with those pipes, your homeowner policy probably will not cover any property damage. The good news is, you can get sewer backup insurance. 

Home business damage or mishaps. Are you a solopreneur with a home-based business venture? Are you a lawyer or therapist who hosts clients in a home office? You should realize that regular homeowners insurance usually won’t cover business-related liability and neither will the normal umbrella liability policy. At the very least, you need commercial liability insurance, which addresses risks your business venture may face inside and outside of your residence. It can cover property damage (to your home or another home you or your employees visit on business) and bodily injury claims. Commercial property insurance can cover business equipment you have at your house. A standard business owner’s policy includes both commercial property and commercial liability coverage.

An accident or theft involving a vehicle you lease. If a car you are leasing is stolen or totaled, there is a good chance that your auto insurance provider will not reimburse you for the full amount of your lease agreement. (This could also be the case for a vehicle you have bought with financing.) How can you mitigate this risk? You can purchase gap insurance from the auto insurance company you have a relationship with, the dealership, or a lender. This coverage can fill in the gap in value between the full lease or loan amount and how much the vehicle was worth at the time of the incident.

Disabilities. If you ever become disabled to the point where you cannot work, your income will disappear. You may end up spending your whole emergency fund and selling assets to make ends meet. Disability insurance focuses on this risk. Yes, some employers offer workers in high-risk occupations disability insurance coverage – but when paid out, those benefits may prove less than adequate.

Has this article made you think about certain things? Perhaps it has. Fundamental insurance coverage is often far ranging, but the above risks to your business, your home, your cars, and your income may need to be addressed with supplemental coverage. Ask an insurance professional about it, today.

At HFG Wealth Management, we embrace a method of financial planning known as Financial Life Planning™. We believe this is a financially effective and personally rewarding approach to creating a practical, lasting financial plan. As financial professionals using the life planning approach, our purpose is to assist individuals and families in creating a long-term vision that is consistent with their core values. At HFG we recognize that life events and life transitions can impact your financial responsibilities and your vision of the future. We are here to provide you with tips and strategies to get you started and help you reach your financial and life goals at every stage. For more information, please visit www.hfgwm.com or call 832.585.0110.

“The information contain herein is general in nature and may not be suitable for everyone. We encourage you to give us a call, to discuss your specific situation and to help determine the appropriate course of action.”

 

Can The Right Insurance Save Your Retirement?


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The right coverage might help to insulate you against a money crisis. 

Most people begin insuring themselves when they marry or start a family. They buy coverage in response to two potential calamities – disability during their working years, and death.

Somewhere between youth and death comes retirement, and in retirement, the role of insurance is often downplayed. Does a retired multimillionaire really need a life insurance policy? Now that he or she is not working, what is the point of having disability coverage?

Make no mistake, insurance can play a vital role in retirement planning. It may help to keep a retiree household financially afloat in a money crisis. It can also be used creatively to address other financial concerns.

What can life insurance do for a retiree before he or she dies? Many permanent life insurance policies accumulate cash value over time. Potentially, that cash value could be tapped to pay off medical expenses, education debt, mortgage debt, or debts owed by a business. It could fund a buy-sell agreement. It could go into an investment vehicle that could later pay out income. While the death benefit of a policy may be reduced as a consequence, the trade-off may be worth it for the policyholder.

What else can life insurance do for a retiree household? It can help the kids. Sometimes a retired dad or mom is 20-30 years older than his or her spouse, and the kids are minors. If the older spouse dies, the death benefit can help to provide for these minor children, who could have special needs.  There is also the matter of income replacement, even in retirement. When a retiree receiving a pension dies, the surviving spouse may subsequently get far less pension income. A life insurance death benefit may help to make up for it. In another scenario, a widowed spouse may elect to live on a life insurance policy’s lump sum death benefit for a year or two, as an alternative to drawing down tax-advantaged retirement savings accounts.

How about disability insurance? In some households, one spouse retires, but another spouse keeps working well into his or her sixties and earns a large income. A couple or family would definitely miss that income if it went away. Keeping disability insurance coverage may be very wise in such instances.

Long-term care coverage is expensive, but not compared to the cost of eldercare. Imagine paying for a semi-private room in a nursing home. Outrageous? Financially speaking, that kind of expense could break the back of a retiree household. Medicare and disability insurance will not absorb the cost – one that could deplete a retiree’s entire savings, with the next step being Medicaid or turning to adult children (who will be retired or approaching retirement themselves). When eldercare is needed, the daily benefit from long-term care coverage can feel invaluable. That benefit can also fund home health care and assisted living services.  

Liability insurance may come in handy. In certain states (such as California), retirement accounts are not protected against creditor lawsuits. So if a judgment against a retiree in one of those states is large enough, retirement account assets may be seized to satisfy it if liability limits on an auto or homeowner policy are too low. This is why an umbrella liability policy may have merit for some retirees.

Insurance should not be a “missing piece” in your retirement plan. You may need life, disability, long-term care, or liability coverage more than you think.

At HFG Wealth Management, we embrace a method of financial planning known as Financial Life Planning™. We believe this is a financially effective and personally rewarding approach to creating a practical, lasting financial plan. As financial professionals using the life planning approach, our purpose is to assist individuals and families in creating a long-term vision that is consistent with their core values. At HFG we recognize that life events and life transitions can impact your financial responsibilities and your vision of the future. We are here to provide you with tips and strategies to get you started and help you reach your financial and life goals at every stage. For more information, please visit www.hfgwm.com or call 832.585.0110.

“The information contain herein is general in nature and may not be suitable for everyone. We encourage you to give us a call, to discuss your specific situation and to help determine the appropriate course of action.”

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Copyright © 2018. HFG Wealth Management, LLC. Investment advisory services offered through HFG Wealth Management, LLC – An independent Registered Investment Advisory firm registered with the SEC. Investing involves risk including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss in periods of declining values. Therefore, any information presented here should only be relied upon when coordinated with individual professional advice. [ more disclosures ]